Five strategic challenges facing UK consulting firms

The consulting industry is a landscape in transition. Consultancies face a broad range of opportunities to guide clients through an unfamiliar new landscape. However, in order to exploit them, they must adapt. To stay competitive, consulting firms will have to rethink their strategies: from their business models to the services they deliver, how they charge for them, the types of expertise they want to develop and the type of skills they hire. Dean Carroll, General Manager of Touchstone CRM, reflects on five strategic challenges that consultancies will have to tackle.

Adapting to new market opportunities 

The market for consultancy services is shifting as clients face new business challenges. In 2016, an analyst firm identified two major growth opportunities; one around risk and regulatory compliance, and the other around digital transformation, a market that has boomed to $23 billion globally. 

On the risk and regulation side, the market is polarised into two parts. The first is commoditised consulting, which makes up the bulk of the market and commands lower fees. For new and potentially disruptive areas of risk and regulation, however, clients still seek traditional, high-value, advice. Consulting firms need to understand what kind of advice their clients need, and adapt their skills, service delivery mechanisms and rates accordingly.

Digital transformation is the other big opportunity, and is growing fast as more client organisations recognise the need to approach “digital” from a top-down, strategic perspective. As digital transformation requires a blend of strategic consultancy and IT implementation; firms that have historically specialised in one or other area will have to restructure their model and operations to combine the two.

There’s no question that firms need to act, though. A firm that tries to keep charging high rates for what’s now seen as “commodity” consulting will find its clients drifting away to lower-cost providers. At the same time, if they don’t pay close attention to how demand is changing, firms risk missing out on big opportunities to consult around risk, regulatory change and digital transformation. Firms must keep a close eye on which services are popular and adapt their fees and expertise in line with changing client demands.

Proving digital transformation credentials

Digital transformation is a hot area of opportunity, but competition for contracts is fierce, and as the stakes are high for the client, the choice of consultant will be under intense scrutiny. Clients are much more likely to trust a consultancy firm that practises what it preaches – one that has clearly gone through a successful digital transformation of its own. If a client sees inefficiencies in your own business operations – if they call you and you don’t immediately respond, for example – they’ll find it hard to put their faith in your ability to lead their own transformation.

You need to show that your firm is agile, responsive and capable of using the latest advances in communication / collaboration, digital service delivery and data analytics to provide an outstanding customer experience.

Getting the right people and skills

With client needs changing, consulting firms require the right people and skills to deliver the new services that clients are demanding. Trawling the top universities for graduates is becoming less viable, as there is fierce competition among recruiters, driving up salaries. Crucially, it also tends to produce a homogeneous workforce – at a time when clients are crying out for diverse viewpoints and new ways of thinking and approaching problems.

Firms looking for innovative people with creative ideas and unconventional skillsets may well find that talent elsewhere, in less-tapped markets – among the newly-retired, for example, or parents returning from a career break. In May last year, Consultancy.uk reported that “one study concluded that employees of diverse organisations are 75% more likely to see their innovative ideas brought to life", while other research by Grant Thornton, revealed that cultural diversity benefits strategy execution and governance.

Without a diversely skilled workforce, consultancies will be forced to compromise on deals they can win, and on the level of service they can offer. Their market will become limited, and staff will become frustrated in not being able to extend their abilities and expertise into other areas that will offer the client value. Staff may feel like they are providing a transactional service rather than a value based one, which can be demoralising. At the same time, competitors who build a diverse workforce will be able to offer greater breadth, depth and quality of service.

Collaborating to differentiate 

No firm is an island – at least not if it wants to keep up with changing client expectations. Today’s clients are demanding more services that firms can deliver with their own inhouse expertise. Digital transformation, for example, requires a mix of strategic consultancy and hands-on technological implementation, and many firms don’t offer both things under the same roof. At the same time, specialist firms are springing up in niche areas like co-creation, service design and innovation management, but they lack the service breadth or industry clout to win really big contracts.

A win-win solution, identified by Source Global Research in a November 2016 blog post, is for firms to collaborate to win and service clients who require a mix of specialist advice. As collaboration becomes more popular, consultancies that continue to go it alone will suffer in one of two ways. Either they’ll seriously limit the quality of service they can offer (if they only focus on delivering one specific type of service), or they’ll find themselves unable to meet their clients’ needs. They must embrace the need to collaborate and bring a greater value of service to their clients. Would a client choose to work with a firm when they can work with an alternative supplier who is able to address more than one of their pressing issues?

Becoming, and remaining, a trusted advisor

In a world where so much client communication takes place over digital channels, the value of the client/ consultant relationship can sometimes be forgotten. However, clients still need consultants who are trusted advisors – who take time to meet with them face to face, ask the right questions, listen to their needs, and make the effort to build rapport.

With limited time available, consultants need to know where their client-facing time can be spent most valuably. They need to be able to spot opportunities to develop and nurture the trusted advisor relationship for the mutual benefit of the client and the firm. In a competitive landscape, if the consultant isn’t taking steps to maintain and grow relationships with valuable clients, another firm will be waiting in the wings to step in.

For more information on the strategic challenges UK management consulting firms are facing, and how CRM can help, download the full thought paper by Touchstone CRM and see the related article 'Trends and challenges in the management consulting industry'.

Dean Carroll is General Manager of Touchstone CRM, a UK provider of CRM products & consulting services and Microsoft CRM Gold Partner. Prior to joining Touchstone CRM, Carroll worked for Microsoft and Vodafone, holding a range of senior management and consulting roles.